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Permalink Reply by john goodday on April 19, 2012 at 10:20

Revised Break Even # - 7 BCF with gas at $1.90 and heading lower.  With the trend continuing as it has, and no end in sight - with an unfriendly Administration in Washington and another warm winter ahead gas prices could plummet below $1 and then I'm guessing 10 BCF would be a Break Even #!

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Permalink Reply by Les Bamburg on April 19, 2012 at 14:27

John, watching the NYMEX prompt month price every day is a general waste of time since it has little bearing on the long term price of natural gas or break-even economics. 

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Permalink Reply by Doob on April 19, 2012 at 15:32

John, How are you doing your economics? There is no way 7 BCF will break even.

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Permalink Reply by john goodday on April 26, 2012 at 1:37

It's unreal how many alternate unit wells are being drilled by Exco in Caspiana Field, Desoto Parish.  Ditto for CHK!

 

Q & A would be interesting with their management.  The wells sure appear to be gut-cinches at 15,000 mcf - 20,000 mcf range, but why not wait until gas prices rebound before bringing these great wells on-line.  They must be strapped for cash and under-water in debt - SAD!

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Permalink Reply by Les Bamburg on April 26, 2012 at 3:14

John, so you are saying spend the capital cost for drilling and completing the wells and then sit on them for 2-3 years instead of producing them today and generating a double digit return.  In the business world that doesn't work since you lose a ton of NPV and ROR on the investment.  

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Permalink Reply by Les Bamburg on April 26, 2012 at 6:06

Mattie, that wasn't the question so I answered John's question.

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Permalink Reply by Mattie on April 27, 2012 at 5:13

Les,

Apparently, our comments/responses are getting crossed up from previous questions.....my apologies if I've skewed the discussion.

I agree with your response regarding NPV and ROR on "existing" wells - makes no sense to wait and see if prices will rebound....as much as I hate to see my share of reserves sold at rock-bottom prices!

My earlier response was regarding your comment about "hedges" - that being, YES, producers do have more liquidity to allow them to budget the drilling of these new wells, BUT they are not "required" to match new drilling/volumes with "swap" positions.  As you know, most producers "hedge" a max of 60-70% of their estimated throughput - they can elect NOT to drill the wells immediately, and take profit on the swaps.  They are merely adding "gas on gas" and exacerbating the problem....including an extension of the relatively flat "NYMEX forward curve".  IF they have expiring leases they feel they need to protect, all bets are off on this point.  That's all I was trying to point out.

 

 

   

   

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Permalink Reply by Hale Yayuh on April 28, 2012 at 5:48

It is just hard to fathom... in certain sweet spots, some HA wells are, indeed, prolific. Say, 3 to 4 BCF in the first year. It is sickening to see new alt unit wells permitted at rock bottom prices. Makes me wonder if it's science they are after. I just wish these multi-billion dollar companies, including a couple of the seven sisters, would wait awhile. If the section is HBP, drill somewhere else!

Permalink Reply by Les Bamburg on April 28, 2012 at 7:23

HY, companies still need generate earnings growth and based on their hedged gas prices of $4.50+ some are still able to accomplish that with alternate Haynesville Shale wells.  To the extent companies have better investment options they will move drilling rigs out of the Haynesville/Bossier Shale play.  We have that already and the trend will continue. 

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